A month ago, I looked at the potential problem areas which – based upon proposals made by the league during its negotiations with the NHLPA - could end up in the new NHL collective bargaining agreement.
Those issues included revenue-sharing, term limits on contracts with salary variance, limits upon entry-level contracts and the length of the CBA.
With a new CBA about to be implemented, key provisions have been released dealing with these issues in more detail.
The league eventually compromised with the NHLPA on contract term limits (seven years instead of five, eight years for re-signed players), while the salary variance was set at 35 percent.
That should alleviate the problem of the top players eating up most of a team’s cap space while leaving little for the middle class, stemming the problem of “cheat contracts”, while allowing sufficient cap space to re-sign lesser talented players to reasonable contracts.
The new CBA, however, does little to assist struggling franchises. The $200 million revenue sharing, up from $150 million, may provide some short-term relief, but over the long haul won’t do much to aid those teams.
Once again, the NHL has kicked the issue of a more robust revenue-sharing plan down the road, hoping the problem will go away over time. It won’t, and will be a significant issue in the next round of collective bargaining.
It appears the same strict limitations upon entry-level contracts – term (3 years), salary and bonuses – could force more promising European talent to remain overseas, where they could earn more money earlier in their pro careers ( especially in the Kontinental Hockey League) than they could in the NHL.
The league got its way on a ten-year CBA, with a mutual “opt-out” at year eight, which could allow potential problems to fester, stoking yet another lengthy labor standoff between the owners and players.
But the biggest problem with this new CBA is it could result in an ever-escalating salary cap, widening the gulf between the wealthy and struggling franchises.
As The Globe & Mail’s James Mirtle recently observed, if the NHL sees an average five percent annual growth in revenue over the life of the new CBA, the salary cap could reach over $80 million by Year Eight (the “opt-out” year), and possibly $90 million by Year Ten.
Worse, the salary cap “floor”, set for $44 million for the first two years of the CBA, could reach almost $60 million by Year Eight, and $66 million by Year Ten.
Granted, the calculation between the salary cap ceiling and floor is now based on a percentage, rather than a fixed number of $16 million as it was under the previous CBA.
As per the Globe and Mail, the cap would be set ”at 15 per cent above a calculated “midpoint” and the floor 15 per cent below it. With a salary cap of $65-million, the floor would be $48-million. As revenues rise, the cap will increase as well while the floor gains more slowly. A gain of $10-million on the cap, for instance, would likely mean the floor goes up $6-million or $7-million.”
That might put a bit of drag upon the increase in the cap floor, but if revenue should rise at five percent annually over the course of this deal, it won’t be enough to help the “have-not” franchises. If you think struggling markets had trouble keeping pace with the cap when it was at $48.3 million last season, imaging the difficulty they could face once it gets to $60 million.
NHL revenue will be down next season because the league and PA agreed to keep it at $64.3 million, and the lingering effect of the lockout could further slow revenue growth.
Then again, at the start of the previous CBA, no one expected a surging Canadian dollar, lucrative broadcasting deals, and tapping other significant revenue streams and sponsors would result in annual league revenue growth of seven percent.
As Mirtle pointed out, during the final two years of the previous CBA, the NHL was seeing revenue growth at nearly 10 percent. Assuming the damage to the NHL brand caused by the lockout is only minimal and short-term, it’s possible it could regain that pace.
What could also push up revenue over the course of this CBA is either expansion into more traditional hockey cities as Quebec City, Southern Ontario or Seattle, or relocating one or more troubled franchises into those markets.
The rising cap, a lack of meaningful revenue-sharing, limits on entry-level contracts, and the length of the new CBA could become significant factors resulting in yet another potentially damaging standoff between the NHL and NHLPA down the road.